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Carking is a company in the luxury car industry

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CarKing is a company in the luxury car industry. To verify its performance, the company is using economic value added (EVA), a managerial technique. The EVA for the company has been calculated as $202,545. This amount has been determined with the following information.

Marginal tax rate 35%
Cos of debt before tax 11%
Cost of equity 13.5%
Costs capitalized for Development 25%
Costs capitalized for Research 30%
Amortization period 6 years
Operating Income $445,808
Capital Employed $1,950,000
Total Development Cost $80,000
Total Research Cost $120,000
Goodwill impairment loss included in income $36,500

Reference no: EM132577134

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